Technical analysis and fundamental analysis are the two main schools of
thought in the financial markets. As we've mentioned, technical analysis looks
at the price movement of a security and uses this data to predict its future
price movements. Fundamental analysis, on the other hand, looks at economic
factors, known as fundamentals. Let's get into the details of how these two
approaches differ, the criticisms against technical analysis and how technical
and fundamental analysis can be used together to analyze securities.
Fundamental Analysis vs Technical Analysis
At the most basic level, a technical analyst approaches a security from the
charts, while a fundamental analyst starts with the financial statements.
By looking at the balance sheet, cash flow statement and income statement, a
fundamental analyst tries to determine a company's value. In financial terms,
an analyst attempts to measure a company's intrinsic value. In this approach,
investment decisions are fairly easy to make - if the price of a stock trades
below its intrinsic value, it's a good investment. Although this is an
oversimplification (fundamental analysis goes beyond just the financial
statements) for the purposes of this tutorial, this simple tenet holds true.
Technical traders, on the other hand, believe there is no reason to analyze a
company's fundamentals because these are all accounted for in the stock's
price. Technicians believe that all the information they need about a stock can
Fundamental analysis takes a relatively long-term approach to analyzing the
market compared to technical analysis. While technical analysis can be used
on a timeframe of weeks, days or even minutes, fundamental analysis often
data over a
The different timeframes that these two approaches use is a result of the
nature of the investing style to which they each adhere. It can take a long time
for a company's value to be reflected in the market, so when a fundamental
analyst estimates intrinsic value, a gain is not realized until the stock's market
price rises to its "correct" value. This type of investing is called value
investing and assumes that the short-term market is wrong, but that the price
of a particular stock will correct itself over the long run. This "long run" can
represent a timeframe of as long as several years, in some cases.
Furthermore, the numbers that a fundamentalist analyzes are only released
over long periods of time. Financial statements are filed quarterly and changes
in earnings per share don't emerge on a daily basis like price and volume
information. Also remember that fundamentals are the actual characteristics
of a business. New management can't implement sweeping changes overnight
and it takes time to create new products, marketing campaigns, supply chains,
etc. Part of the reason that fundamental analysts use a long-term timeframe,
therefore, is because the data they use to analyze a stock is generated much
more slowly than the price and volume data used by technical analysts.
Not only is technical analysis more short term in nature than fundamental
analysis, but the goals of a purchase (or sale) of a stock are usually different
for each approach. In general, technical analysis is used for a trade, whereas
fundamental analysis is used to make an investment. Investors buy assets they
believe can increase in value, while traders buy assets they believe they can
sell to somebody else at a greater price. The line between a trade and an
investment can be blurry, but it does characterize a difference between the
Calculates stock value
using economic factors,
known as fundamentals.
When price falls below
Return on Equity (ROE)
and Return on Assets
Uses price movement of
future price movements
When trader believes
they can sell it on for a
Dow Theory, Price Data
AOL from November
2001 through August
Some critics see technical analysis as a form of black magic. Don't be surprised
to see them question the validity of the discipline to the point where they
mock its supporters. In fact, technical analysis has only recently begun to
enjoy some mainstream credibility. While most analysts on Wall Street focus
on the fundamental side, just about any major brokerage now employs
Much of the criticism of technical analysis has its roots in academic theory specifically the efficient market hypothesis (EMH). This theory says that the
market's price is always the correct one - any past trading information is
already reflected in the price of the stock and, therefore, any analysis to find
There are three versions of EMH. In the first, called weak form efficiency, all
past price information is already included in the current price. According to
weak form efficiency, technical analysis can't predict future movements
because all past information has already been accounted for and, therefore,
analyzing the stock's past price movements will provide no insight into its
future movements. In the second, semi-strong form efficiency, fundamental
analysis is also claimed to be of little use in finding investment opportunities.
The third is strong form efficiency, which states that all information in the
market is accounted for in a stock's price and neither technical nor
fundamental analysis can provide investors with an edge. The vast majority of
academics believe in at least the weak version of EMH, therefore, from their
point of view, if technical analysis works, market efficiency will be called into
There is no right answer as to who is correct. There are arguments to be made
on both sides and, therefore, it's up to you to do the homework and determine
your own philosophy.
Can They Co-Exist?
Although technical analysis and fundamental analysis are seen by many as
polar opposites - the oil and water of investing - many market participants
have experienced great success by combining the two. For example, some
fundamental analysts use technical analysis techniques to figure out the best
time to enter into an undervalued security. Oftentimes, this situation occurs
when the security is severely oversold. By timing entry into a security, the
Alternatively, some technical traders might look at fundamentals to add
strength to a technical signal. For example, if a sell signal is given through
technical patterns and indicators, a technical trader might look to reaffirm his
or her decision by looking at some key fundamental data. Oftentimes, having
both the fundamentals and technicals on your side can provide the best-case
While mixing some of the components of technical and fundamental analysis
is not well received by the most devoted groups in each school, there are
certainly benefits to at least understanding both schools of thought.
AUTOMOBILE INDUSTRY IN INDIA
The automotive industry in India is one of the larger markets in the world
and had previously been one of the fastest growing globally, but is now seeing
flat or negative growth rates.India's passenger car and commercial vehicle
manufacturing industry is the sixth largest in Automobile Industry in India the
world, with an annual production of more than 3.9 million units in
2011. According to recent reports, India overtook Brazil and became the
sixth largest passenger vehicle producer in the world (beating such old and
new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia,
Spain, France, Brazil), grew 16 to 18 per cent to sell around three million units
in the course of 2011-12. In 2009, India emerged as Asia's fourth largest
exporter of passenger, behind Japan, South Korea, and Thailand. In 2010,
India beat Thailand to become Asia's third largest exporter of passenger cars.
As of 2010, India is home to 40 million passenger vehicles. More than 3.7
million automotive vehicles were produced in India in 2010 (an increase of
33.9%), making the country the second (after China) fastest growing
automobile market in the world in that year. According to the Society of
Indian Automobile Manufacturers, annual vehicle sales are projected to
increase to 4 million by 2015, no longer 5 million as previously projected. 
The majority of India's car manufacturing industry is based around three
clusters in the south, west and north. The southern cluster consisting
of Chennai is the biggest with 35% of the revenue share. The western hub
near Mumbai and Pune contributes to 33% of the market and the northern
cluster around the National Capital Region contributes 32%. Chennai, with
of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan
Daimler, Caparo, and PSA Peugeot Citroën is about to begin their operations
by 2014. Chennai accounts for 60% of the country's automotive
exports. Gurgaon and Manesar in Haryana form the northern cluster where
based.The Chakan corridor near Pune, Maharashtra is the western cluster
General, Volkswagen, Skoda, Mahindra
Mahindra, Tata Motors, Mercedes Benz, Land, Jaguar Cars, Fiat and Force
Motors.having assembly plants in the area. Nashik has a major base of
Mahindra & Mahindra with a UV assembly unit and an Engine assembly
unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the
western cluster. Another emerging cluster is in the state of Gujarat with
manufacturing facility of General in Halol and further planned for Tata
Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants
Gujarat. Kolkata with
Hindustan, Noida with Honda and Bangalore with Toyota are some of the
other automotive manufacturing regions around the country.
The Indian automotive industry has emerged as a 'sunrise sector' in the Indian
economy. India is being deemed as one of the world's fastest growing
passenger car markets and second largest two wheeler manufacturer. It is
also home for the largest motor cycle manufacturer and the fifth largest
commercial vehicle manufacturer.
India is expected to become the third largest automobile market in the world.
Ford is looking at India as a major export hub, as per Mr Joginder Singh,
President and Managing Director, Ford India.
By 2020, the luxury car segment is estimated to be around three per cent of
the overall passenger car market in India. So, there is huge opportunity for
growth. India is going to be one of the biggest markets for us, worldwide,
according to Tomas Ernberg, Managing Director, Volvo Auto India.
India is the largest base to export compact cars to Europe. Moreover, hybrid
and electronic vehicles are new developments on the automobile canvas and
India is one of the key markets for them. Global and Indian manufacturers are
focussing their efforts to develop innovative products, technologies and
The amount of cumulative foreign direct investment (FDI) inflow into the
automobile industry during April 2000 to November 2012 was worth US$
7,518 million, amounting to 4 per cent of the total FDI inflows (in terms of
US$), as per data published by Department of Industrial Policy and Promotion
(DIPP), Ministry of Commerce.
India's scooter and motorcycle manufacturers have registered 4 per cent
growth during April-November 2012, according to the recent data released by
the Society of Indian Automobile Manufacturers (SIAM). Moreover, the
passenger vehicles segment grew at 9.71 per cent during April-June 2012,
while overall commercial vehicle segment registered an expansion of 6.06 per
cent year-on-year (y-o-y).
The Indian small and light commercial vehicle segment is expected to more
than double by 2015-16 and to grow at 18.5 per cent compound annual
growth rate (CAGR) for the next five years, according to a report titled,
'Strategic Assessment of Small and Light Commercial Vehicles Market in India'
by Frost & Sullivan.
Major Developments & Investments
Volvo Group plans to invest Rs 3,800 crore (US$ 710.28 million) in India
over the next few years. Of this, Rs 1,800 crore (US$ 336.45 million)
would be invested in its joint venture (JV) with Eicher Motors. Volvo
also aims to export about 30 per cent of the capacity at its Indian engine
plant it plans to open in Pithampur, Madhya Pradesh in 2013, as it looks
to leverage costs from India operations
Honda Car India, the wholly-owned subsidiary of Honda Motor Co, plans
to set up a greenfield diesel engine factory at its second industrial
location in Rajasthan
Jaguar Land Rover (JLR) will incur capital expenditure worth US$ 3.26
billion per year over the medium term mainly for product development,
according to Crisil. In addition, Tata Motors has started assembling the
Jaguar XF at its new facility in Chakan near Pune, Maharashtra
The research and development (R&D) team of Fiat India will assist
Chrysler to design and develop the smallest Jeep, to be launched
globally by mid-2014. The Italian company has also commissioned an
R&D set-up, Chrysler India Automotive Pvt Ltd, in Chennai
Hero MotoCorp has started construction of its fourth manufacturing
plant and a new Global Parts Centre (GPC) at Neemrana, Rajasthan. The
project will attract an investment of Rs 550 crore (US$ 102.80 million)
and both facilities are expected to be operational by FY 2013-14
Mahindra & Mahindra (M&M) plans to invest US$ 900 million over the
next four years in SsangYong Motor for developing three new vehicles
and six engines. The investment would be from internal accruals, fresh
equity and debt, as per Mr Pawan Goenka, President (Automotive &
Farm Equipment sectors), M&M. The firm plans to buy Navistar's 49 per
cent stake in the truck and engine making joint ventures (JV) - Mahindra
Navistar Automotives Ltd and Mahindra Navistar Engines Pvt Ltd - for
about US$ 31.95 million
Luxury carmakers like BMW, Audi are planning more 'Made in India'
products to increase the number of offerings in the sub Rs 2.5 million
(US$ 46,729) category to expand market. The luxury carmakers are
planning to tap the younger customers with lower price points
VE Commercial Vehicles Ltd (VECV), a joint venture between Sweden's
Volvo Group and homegrown Eicher Motors, will invest Rs 1,200 crore
(US$ 224.30 million) by 2014 for expanding production capacity and
developing new products
Luxury car brands in India have registered a growth of 12.5 per cent
during January-November 2012 period. The luxury car market in India
is expected to reach 150,000 units by 2020, as per Mr Tomas Ernberg,
Managing Director (MD), Volvo Auto India
The Government of India (GoI) plans to introduce fuel-efficiency ratings for
automobiles to encourage sale of cars that consume less petrol or diesel, as
per Mr Veerappa Moily, Union Minister for Petroleum and Natural Gas.
The GoI plans to push the supply of vehicles powered by electricity over the
next eight years. It is expected that there will be a demand of 5-7 million
electricity-operated vehicles by 2020.
The GoI allows 100 per cent foreign direct investment (FDI) in the automotive
industry through automatic route.
The Automotive Mission Plan (AMP) 2006-2016 aims at doubling the
contribution of automotive sector in gross domestic product (GDP) by taking
the turnover to US$ 145 billion in 2016 with special emphasis on export of
small cars, multi-utility vehicles (MUVs), two & three wheelers and auto
The rapid improvement in infrastructure, huge domestic market, increasing
purchasing power, established financial market and stable corporate
governance framework have made the country a favourable destination for
investment by global majors in the auto industry, as per Automotive Mission
Plan (AMP) (2006-16).
Additionally, the introduction of alternative fuels like hydrogen and bio fuels
needs to be promoted to ensure sustainability of the industry over the long
The vision of AMP 2006-2016 aims India "to emerge as the destination of
choice in the world for design and manufacture of automobiles and auto
components with output reaching a level of US$ 145 billion accounting for
more than 10 per cent of the GDP and providing additional employment to 25
million people by 2016."
In addition, the US-based car major, Ford aims to make India its export hub
and plans to sell its products in more than 50 countries over a period of time.
The company has committed a total investment of US$ 2 billion in India so far
The luxury car market of India is set for growth over the medium and long
term, according to Mr Philipp Von Sahr, President, BMW Group India. The
market is about 30,000 cars a year and is rising steadily, added Mr Sahr.
Exchange Rate Used: INR 1 = US$ 0.01870 as on January 22, 2013
References: Media Reports, Press Releases, Department of Industrial Policy and
Promotion (DIPP), Society of Indian Automobile Manufacturers (SIAM)
Top Automobile Companies in India
Starting from the era when there was too slim of a variety of cars available in
Indian market, Indian automobile industry has come up a long way to have a
diverse array of cars these days. There are a number of top automobile
companies running their operations in India, which again have a range of
models in different segments of cars. However, while looking for top 10
automobile companies in India, one name that would always lead the list is
Maruti Suzuki India. Maruti Suzuki has consistently been the dominant leader
in the Indian automobile industry. However, there are also other big names
like Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hindustan Motors
During its early days, the most of the Indian car auto manufacturers banked
upon foreign technologies. But the scenario has changed over the years and
currently, the Indian auto manufacturers are using their own technology. Due
to the growing pace of Indian automobile market, a number of car
manufacturers including the global leaders have locked their horns in the
After the recent setback due to the global recession, the Indian automobile
market has again started to grow up. Though the auto sales except commercial
vehicles started creeping up since the beginning of this financial year, it's only
the month of September 2009 when the market saw buoyant sales. It fuelled
optimism in the industry. The retail trade also started soaring up. The auto
sales saw a 9.6% rise in the month of September with a sale of 1,092,262
units. The passenger vehicle sales also grew by 20.32%. The two wheeler
market was also augmented by 7.67% during the same period with a total sale
of 838,150 units. The same trade is applicable for the three-wheeler market,
which saw a growth of 13.51% (with sale of 41,137 units) during the same
List of Top Automobile Companies in India, 2011(Figures in ` Crores)
Tata Motors Ltd.
Maruti Suzuki India
38140.69 2382.37 31475.63 14762.9
123222.91 9273.62 56499.77 52209.48
37026.37 3079.73 49945.17 36926.19
Hero MotoCorp Ltd. 19669.29 1927.9 40398.63 4447.22
Bajaj Auto Ltd.
17008.05 3454.89 46885.69 5154.96
Ashok Leyland Ltd. 11133.04 631.3
Eicher Motors Ltd.
Force Motors Ltd.
Tata Motors is the largest automobile company of Asia headquartered in
Mumbai, India. Annual Projected revenue for 2010-11 is US$ 27.629 billion. It
also occupies the number one position in commercial car segment. Tata
Motors enjoys 31.2% of market share in the multi-utility vehicles, which in
luxury car segment, it has 6.4% market share. Most of the Tata Motors'
vehicles are sold predominantly in India and over 4 million vehicles have been
Tata sold 52,531 units of vehicles during September 2009, comparing to
49,647 units during September 2008 (a growth of 6%). In domestic market,
Tata Motors sold 49,650 units during the same period, comparing to 45,234
units in September 2008.
Maruti Suzuki India Limited (MSIL)
Maruti Suzuki India is an undisputed leader in the Indian automobile industry.
Started its journey in February 1981 as Maurti Udyog Limited, the company
created history in the Indian automobile market with its hugely popular fourwheeler model Maruti 800. The company became the first Indian automobile
company to manufacture one million vehicles in 1994. The company became
Maruti's average revenue for the year ending 2010-11 is US$7.13 billion.
Maruti sold 83,306 units of vehicles in September 2009, comparing to 71,000
units in the same month in the previous year (with a growth rate of 17.3%). It
also exported 11,712 units during September 2009, comparing to 6,318 units
in the same month in the previous year (with a growth rate of 85.4%).
Hyundai Motor India Limited (HMIL)
Hyundai Motor India Limited, founded in 1998 and a subsidiary of Korean
auto giant Hyundai Motor Company, is the second largest car manufacturer in
India. It is also country's largest passenger car exporter. Hyundai Motor came
very close to the hearts of the Indian auto lovers through its flagship model
After the recession, Hyundai Motor saw a growth rate of 25% in the domestic
market. During September 2009, HMIL sold 53,804 units, comparing to
46,218 units during September 2008. In the domestic market, it sold 27,803
units in September 2009, comparing to 22,311 during September 2008. The
overseas sales during the same period also grew up 9% as it sold 26,001 units
in September 2009, comparing to 23,907 units during the same month in the
Mahindra & Mahindra Limited (M&M)
Mahindra &Mahindra Limited is another auto-giant in India. A part of the
Mahindra Group, M&M is the largest SUV maker in the country. In September
2009, M&M registered a domestic sale of record 26,921 units, comparing to
22,729 units in September 2008 (with an increase of 18.4%). On the other
hand, it sold 15,296 units of UV in the same period comparing to 10,641 units
in September 2008 (with a whooping growth of 43.7%).
General Motors India Private Limited (GM India)
General Motors India Private Limited is another top player in Indian
automobile industry. A wholly-owned subsidiary of the auto giant General
Motors, GM India saw a Y-o-Y sales growth of 49% in September 2009 with a
sale of 7,654 units, comparing to 5,154 units in September 2008.
Hero MotoCorp Limited
In 2010, When Honda decided to move out of the joint venture, Hero Group
bought the shares held by Honda. Subsequently, in August 2011 the company
was renamed Hero MotoCorp with a new corporate identity.
Hero Honda Motors Limited, the joint venture between Hero Group and
Honda, was the biggest two-wheeler manufacturers in the world. It shook the
Indian two-wheeler market with its famous model Hero Honda Splendor,
which became the largest selling motorcycle in the world. It consistently sold
In 2008-09, Hero Honda sold about 3.28 million bikes and registered a net
profit of ` 1281.7 crore. It sold 4,01,290 units of two-wheeler in September
2009, comparing to 3,85,262 in September 2008. It already sold 11,83,235
units of two-wheelers in Q2 of FY10 with a growth rate of 21.7% against the
corresponding period of the previous year.
Bajaj Auto is the second largest two-wheeler manufacturer in India. It is also
the fourth largest two and three-wheeler maker in the world. In September
2009, Bajaj Auto sold 249,795 units of two-wheelers, comparing to 218,494
units in September 2008 (with a growth rate of 14.3%). During September
2009, it also registered a growth of 12.4% in the domestic two-wheeler sales
and 19.9% in two-wheeler export.
Honda Siel Cars India Limited (HSCI)
Honda Siel Cars India Limited, a joint venture between the Japanese auto giant
Honda Motor Company Limited and the Indian company Siel Limited, started
its operation in December 1995. In September 2009, HSCI sold 5,794 units,
comparing to 3,104 units in September 2008 (with a growth rate of 86.7%).
Toyota Kirloskar Motor Private Limited (TKM)
Toyota Kirloskar Motor Private Limited is another top Indian automobile
company. A joint venture between the Japanese auto giant Toyota Motor
Corporation and Kirloskar Group, TKM has a number of car models including
Innova, Corolla, Fortuner, Camry and the Land Cruiser Prado. It sold 7,657
units in December 2009.
Hindustan Motors is another top automobile company in India. It was once
country's largest car manufacturer before Maruti Udyog overpowered it. Its
popular model 'Ambassador' has been extensively used as government
limousine as well as taxi cab in India.